This week, Rep. Nancy Pelosi, D-Calif., got heated in an argument with CNN’s Jake Tapper regarding allegations from President Donald Trump that Nancy Pelosi has traded on insider information.
“That’s ridiculous!” Pelosi claimed. But is it ridiculous?
Insider trading is the act of using information which is not public to make financial decisions. The kind of information you might get if you were, for instance, a long-serving member of Congress and former Speaker of the House.
Why is Nancy Pelosi under the microscope? It has to do with her investing performance. According to congressional trading reports published by a variety of sources who track the performance of politicians in the stock market, Pelosi’s portfolio in 2024 more than doubled the rate of return of famed investor Warren Buffett (70.9% vs 27.1%, respectively).
It’s performance like this, combined with her estimated net worth of $260 million dollars (relative to her salary of $174,000 per year) that has led some in Congress, including Republican Josh Hawley, to introduce the aptly named PELOSI Act – a bill which seeks to ban members of Congress from owning or trading individual stocks.
Hawley was blunt in his reasoning, stating:
We’ve seen the former Speaker of the House make millions of dollars in profits. […] The reason for all of this is that quite frankly, members of this body are privy to information that the normal person just is not. […] Eighty-six percent of Americans say that Congress should not be able to buy and sell shares of individual stock while they are members of this body.
Following Hawley’s speech, the bill made it out of the committee, advancing by a slim margin of 8-7. Later, President Trump was asked for his take on the bill, and he pulled absolutely zero punches, while remaining acknowledging that he’d have to look into the bill further before throwing his full support behind it:
Well, I like it conceptually. I don’t know about it, but I like it conceptually. […] You know, Nancy Pelosi became rich by having inside information. I think that’s disgraceful. In that sense, I’d like it, but I’d have to really see it. You know, I study these things very carefully and this just happened. I’ll take a look at it, but conceptually, I like it.
Trump went on to say Nancy Pelosi should be investigated. However, if you ask Nancy Pelosi about insider trading, you’ll quickly find out that she’s not even into it – her husband is! Surely they never speak about the goings-on of the many closed-door meetings Pelosi is involved in which could directly impact specific stocks that Nancy Pelosi’s husband trades! That would be nonsense.
At least, that’s what was implied during a tense exchange between Nancy Pelosi and CNN’s Jake Tapper. During the exchange, as the anchor brought up the comments from President Trump, Pelosi immediately tried to change the topic, before deflecting.
“Let me just read what he said, ‘Nancy Pelosi became rich-’” The anchor noted before immediately being cut off by a flustered Pelosi who said, “Why do you have to read that? We’re here to talk about the 60th anniversary of Medicaid. That’s what I agreed to come to talk about.”
“I wanted to give you a chance to respond: He accused you of insider trading. What’s your response to that?”
Pelosi immediately dismissed the claims before reiterating that she isn’t “into” trading – her husband is.
That’s ridiculous. In fact, I very much support the ‘stop the trading of members of Congress,’ Not that I think anyone’s doing anything wrong. If they are, they are prosecuted and they go to jail. But because of the confidence it instills in the American people, don’t worry about this. But I have no concern about the obvious, uh, investments that have been made over time. I’m not into it, my husband is, but it isn’t anything to do with anything insider.
Of course Pelosi supports the bill to stop members of Congress from trading – she isn’t a trader, her husband is! So it’s all okay, right?
To better understand exactly why President Trump and so many others have honed in on particularly Nancy Pelosi’s trades, it’s crucial to understand the way in which Pelosi trades.
Most of Pelosi’s trades are bought in the form of options – leveraged bets on the direction of an asset over a specific time. Options are not just a vote of confidence in a company – they’re a time-specific “bet” on the movement of an asset.
If you’re right, you can make significantly more than you would if you were just holding shares of a stock. If you are wrong, you risk losing 100% of your investment. It just so happens that Pelosi has a solid track record of being right quite regularly. But even if you’re not a sitting member of Congress, there are ways to take advantage of under-the-radar trades and investments like these which may be placed by those who know more than the general public.
At Market Rebellion, our team of options analysts use advanced algorithms to follow every single trade placed in the options market, every single day, looking for what we refer to as “unusual options activity.”
These are highly leveraged, high-dollar bets which slip under the radar of typical traders, but to us, stick out like a sore thumb. Sometimes, these high-dollar options trades end up forecasting major news, including infamously the tragic act of terrorism that occurred on 9/11, which was preceded by a massive bearish bet against several impacted companies. What have we learned from our years spent tracking the types of purchases that those who are “in the know” love to make the most? The swamp is deep. Deeper than just politicians.
Even if the PELOSI Act is passed, and Congress members are fully banned from owning or trading stocks, there will still be no shortage of bad actors attempting to make these types of leveraged bets on events which they may already know the outcome of. At the end of the day, instead of loathing an unfair system bent on keeping individual traders down, it’s the opinion of many market analysts and professional traders that there’s potential money to be made in following the smart money as they make these under the radar options trades.
Because if there’s one thing that no Congressional act can do away with, it’s greed.